This is what I do that doesn't waste any CD.
On main PC, Install Virtual PC, Daemon Tool, and nLited ISO. Install nLite if you want to.
- Mouted the ISO via Daemon Tool.
- Fire up Virtual PC or create on if doesn't exist.
- Select "Use Physical CD/DVD Drive X" under CD on the menu bar. Drive X is where the Mouted ISO.

Sound like you need an 'solid-state' rewritable drive that acts like a cd player. How do you get the ISOs to it? Who makes the ISOs -- the host computer or the solid-state device? Need multiple ISOs images?

One could build this device to use IDE channel to read and write to it. I imagine the drive will need to use two different partitions (one hard drive, one cd-rom) but point to the same area so uploads and downloads could happen. With a embedded processor, you can even pick the ISO image before the host computers reads the IDE channel.

This is way more advanced than the solid-state cd-drives (which really were HD but with a switch to change drive types) that I heard some software/hardware houses use.